How does the bill propose to strengthen employees’ rights on dismissal?
Employees who establish that they have been unfairly dismissed can obtain compensation from the Employment Tribunal.
At the moment, employees must have completed more than two years continuous employment to be eligible to submit an unfair dismissal claim. This two-year qualifying period is being challenged in the House of Lords on the basis that it indirectly discriminates against women, who are statistically more likely to change jobs more regularly than their male counterparts.
The Employment Relations Bill will reduce this qualifying period to one year, at a stroke increasing the number of potential applicants able to bring claims to the tribunal.
The bill also proposes raising the maximum compensatory award from £12 000 to £50 000. At one stage, the proposal was that the potential award should not be subject to any limit but an upper limit was agreed after lobbying by employers’ groups.
Claims will still have to be submitted to the Employment Tribunal within three months of the date of dismissal. Late applications are not usually accepted.
What will the changes mean for employers?
Dismissing employees is likely to become a more expensive business for employers.
The increase in the number of employees who can bring claims will result in greater legal expenses for employers if they choose to defend such cases and larger awards to pay when they lose. Employees who are aware of the greater potential compensation on offer may push for higher out-of-court settlements.
Dismissing employees is likely to become a more expensive business for employers. Employees may push for higher out-of-court settlements
Employers trying to minimise their exposure to such claims have several options.
First, they may dismiss underperforming employees before the new legislation comes into effect. Second, they may make greater use of fixed-term contracts that last for less than a year to ensure that employees do not accrue the necessary length of service to be eligible to submit a claim.
Last, employers may make more effort to prove that they are acting fairly before dismissing an employee. Disciplinary procedures and performance review systems may have to be overhauled to ensure that they will withstand careful scrutiny by the tribunal.
What will the changes mean for employees?
Employees will have greater protection against instant dismissal. The greater amounts of potential compensation available may encourage greater numbers to bring their claims to the tribunal, particularly more highly paid employees who have traditionally been more inclined to go to the High Court.
Who pays the legal costs if the case goes to court?
Both employers and employees will continue to be responsible for their own legal costs, whether they win or lose their case in the Employment Tribunal. However, employees considering claims can look for help from a variety of sources, including law centres and Citizens Advice Bureaux, as well as consultants and solicitors who offer “no win, no fee” arrangements.
Ian Hunter is a partner and employment law specialist at City law firm Bird & Bird and author of Which? Guide to Employment.